Exceptions to Important FHA Loan Rules

July 12, 2023

FHA loans have rules, like any type of mortgage. But FHA loan rules sometimes have exceptions you should know about, and not all those exceptions work in the borrower’s favor. That said, many of those cases are not deal-breakers, but you should know about them in advance.

FHA Loan Rule Exceptions: Down Payments

There is indeed no zero-down FHA Single-Family home loan for typical purchases. But does that mean you have to come up with the down payment yourself? No, it does not, provided you have down payment gifts that meet FHA loan and lender requirements. What are they?

Proper sourcing, a lender-required letter explaining that sourcing for the lender, and in some cases, a requirement that the funds remain in the borrower’s account for a certain amount of time.

There is an exception to this exception, believe it or not. And it’s not an FHA regulation. FHA lenders who approve One-Time Close construction loans typically want you to come up with your own down payment and not rely on assistance.

FHA Loan Rule Exceptions: The Appraisal

When you buy a new or existing construction home, an appraisal is typically required as a condition of loan approval before you can close the deal.

But if you are buying and renovating a home with an FHA 203(k) Rehab Loan, you won’t be required to hire a professional to appraise the property as-is, but after the repair work is finished.

FHA Loan Rule Exceptions: Only One FHA Loan at a Time

FHA mortgages are typically for those who want to occupy the home after the loan is closed as their primary residence. But some borrowers may qualify for another FHA loan if they have a career change that requires relocation, a change in family size, or if a co-borrower vacates the property and applies for an FHA loan of their own.

All exceptions to the FHA loan rules mentioned here are handled case-by-case. Your circumstances, the lender’s standards, and other variables may all affect how your application is handled when it’s time to approve or deny an FHA home loan.

Ask a participating lender about any applicable exceptions to FHA loan rules that might apply in your case if you aren’t sure how any of the above scenarios apply to you.

Remember that state law, changes in federal guidelines, or alterations to government-backed mortgage loan programs may all have a say in the lender’s decision.

If you haven’t researched your FHA loan options in a while, some rules may have changed in the meantime. It’s a good idea to review any areas you have concerns with during the planning stages of your mortgage.

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